HC Deb 02 April 1996 vol 275 cc213-7W
Mr. Denham

To ask the Secretary of State for Social Security what estimate he has made of the average time required by his Department to issue a new contracting-out certificate, after receipt of the application. [23122]

Mr. Heald

The issue of new contracting-out certificates is the responsibility of the Occupational Pensions Board.

Since April 1995, the OPB has issued all new certificates within its target of five days of receipt of all correctly completed documentation.

Mr. Denham

To ask the Secretary of State for Social Security what will be the statutory timetable for conducting(a) the consultation procedures for the purposes of sections 16 to 21 of the Pensions Act 1995, (b) the consequential nomination and selection of member-nominated trustees or directors and (c) the consultation procedure in connection with an application for a contracting-out certificate under the amended contracting-out requirements inserted by the Pensions Act 1995. [23124]

Mr. Heald

We propose to introduce regulations which will give trustees six months to obtain approval for nomination and selection rules and to implement the appointment of member-nominated trustees or directors. Employers will also have six months in which to secure the approval of scheme members for any alternative to member-nominated trustees or directors. The trustees' six months will run from the date on which the employer gives notice that he does not wish either to make, or to continue with, an alternative proposal.

The regulations will contain transitional provisions which will permit schemes to start the consultation procedures from October 1996 and will allow the balance of any time between October 1996 and April 1997 not used by the employer to be added to the trustees' statutory six months.

There is currently no statutory timetable for conducting the consultation process required in connection with an application for a contracting-out certificate and we have no plans to change this for applications made after 6 April 1997.

Mr. Denham

To ask the Secretary of State for Social Security how many(a) employments and (b) earners currently contracted out he estimates will cease to be contracted out, following the commencement of the Pensions Act 1995. [23127]

Mr. Heald

The provisions of the Pensions Act 1995, including the new flexibilities proposed for contracted-out mixed-benefit schemes, are designed to ensure that contracting out remains an attractive option for the future.

In his report on the effect of the financial provisions of the Pensions Bill 1994 on the national insurance fund—Cm 2714—the Government Actuary provided details of the assumptions used to determine the estimates of the number of contributions contracted out during the period covered by the report.

Mr. Denham

To ask the Secretary of State for Social Security what advice his Department has issued as to the date by which employers commence the three-month statutory consultation procedure required for an employment to be contracted out. [23131]

Mr. Heald

The Occupational Pensions Board has issued guidance on the procedures for elections to contract out and consultation. There is no statutory three-month period of consultation. There is, however, a statutory requirement on the employer to issue a notice of intention to contract out which will normally be for a period of three months.

How the consultation process is to be conducted is not laid down in legislation, although the OPB recommends that, as a matter of good practice, consultation should be started in advance of giving notice of intention to contract out.

Mr. Denham

To ask the Secretary of State for Social Security if his Department will advise members of occupational pension schemes who are aged just over a year before the scheme's normal pension age to transfer to a personal pension scheme; and what estimates his Department has made of the effect on the cash flow of occupational pension schemes of such transfer.[23195]

Mr. Heald

No. I recommend anyone considering such a transfer to seek financial advice. General information on transferring into a personal pension is, however, contained in leaflet "PP 1" published by the Department. The Securities and Investments Board also publishes fact sheets for people considering opting out of their employer's scheme and transferring to a personal pension.

An estimate of the cash flow effects on occupational schemes would not be worthwhile in the absence of any firm evidence that significant numbers of such transfers would take place.

Mr. Denham

To ask the Secretary of State for Social Security what were the results of the compliance cost assessment conducted by his Department in respect of the administrative cost imposed on employers and occupational pension schemes of implementing the changes in contracting-out arrangements. [23125]

Mr. Heald

The compliance cost assessment in respect of the Pensions Bill of 1994 was published in December 1994 and was updated in April 1995. It takes into account the implications for employers and schemes of the changes to the contracting-out arrangements. The CCA will shortly be further updated to reflect the impact of the provisions contained in secondary legislation.

Mr. Denham

To ask the Secretary of State for Social Security what assessment he has made of the consistency of his proposal concerning the treatment of pensioners' rights on wind-up of an occupational scheme with section 67 of the Pensions Act 1995. [23159]

Mr. Heald

The statutory priority order which trustees will have to follow when a scheme subject to the minimum funding requirement winds up will not change any member's rights. A scheme with sufficient funds to meet all of its liabilities will be able to discharge them in full.

If a scheme winds up in deficit, that statutory priority order will ensure an equitable distribution of the assets. It will protect pensions in payment by giving them a high priority.

Mr. Denham

To ask the Secretary of State for Social Security (1) if he will issue guidance to non-public service occupational pension schemes on the treatment of guaranteed minimum pensions accruing in respect of pensionable service between 17 May 1990 and 5 April 1997;[23713]

(2) what guidance the Occupational Pensions Board has provided to occupational pension schemes or their administrators on the application of equal treatment requirements to guaranteed minimum pensions accruing from pensionable service completed between 17 May 1990 and 5 April 1997. [23712]

Mr. Heald

Neither the Department of Social Security nor the Occupational Pensions Board has issued guidance to occupational pension schemes in respect of equal treatment and guaranteed minimum pensions in the period 17 May 1990 to 5 April 1997 and none is planned.

Mr. Denham

To ask the Secretary of State for Social Security (1) if he will introduce regulations to ensure that professional advisers to occupational pension schemes are not obliged to report to the Occupational Pensions Regulatory Authority failures to conform with statutory requirements which have been rectified(a) before they come to the attention of the professional adviser and (b) within one month of being drawn to the attention of the trustees or managers of the scheme, where, in each case, no scheme member or beneficiary suffers loss as a result; [23714]

(2) if (a) he or (b) the Occupational Pensions Regulatory Authority will give guidance to occupational pensions scheme actuaries and auditors, on insignificant infringements of the Pensions Act 1995 which need not be reported to the Occupational Pensions Regulatory Authority; [23762]

(3) if he will direct the Occupational Pensions Regulatory Authority to seek to reach an understanding with relevant professional bodies before 6 April 1997, to ensure that those bodies issue guidance to limit reports of trivial infringements of the Pensions Act 1995. [23722]

Mr. Heald

We do not intend to introduce any regulations or issue any guidance on these matters. It will be for professional advisers, using their specialist knowledge and experience, to decide whether a matter is of material significance to the Occupational Pensions Regulatory Authority and should, therefore, be reported. Equally, it will be for the authority to decide what action to take in response to such reports and whether, in the light of any investigation, any penalty is appropriate.

It is, of course, open to the relevant professional bodies and the authority to issue guidance on these matters, if they consider it appropriate to do so. Indeed, we understand that the Auditing Practices Board and the Institute and the Faculty of Actuaries are considering guidance on the duty to report to the authority.

Mr. Denham

To ask the Secretary of State for Social Security (1) how many notifications of breaches of the Pensions Act 1995 or regulations made under it he expects the Occupational Pensions Regulatory Authority to receive(a) in the first six months and (b) subsequently on an annual basis; and what proportion of these he expects the Occupational Pensions Regulatory Authority to take action on; [23734]

(2) what estimate he has made of the number of instances where professional advisers will be obliged to make reports to the Occupational Pensions Regulatory Authority between 6 April 1997 and 5 July 1997; and what assessment he has made of the staff and resources available to the Occupational Pensions Regulatory Authority to enable it to deal with the above estimate. [23715]

Mr. Heald

It is not possible to forecast accurately the number of notifications of breaches that the Occupational Pensions Regulatory Authority will receive, as the authority will be enforcing new legislation in areas not presently subject to such a high degree of regulation. However, for resourcing purposes, estimates of overall work loads for the authority have been based on the number of inquiries currently received by the occupational pensions advisory service and on the experience of the Irish Pensions Board. On this basis, it has been estimated that the authority might expect to receive approximately 30,000 notifications in a full year from all sources. Of these cases, it is estimated that up to 20 per cent. might require the authority to consider taking some further form of regulatory or enforcement action, beyond initial investigation.

Reports from professional advisers will be only one of the many sources of notifications about problems with schemes available to the Occupational Pensions Regulatory Authority. It will be for the authority to decide the level of staff and resources it should make available to deal with such reports.

Mr. Denham

To ask the Secretary of State for Social Security to what level of accuracy and within what time scale he will require the Contributions Agency to make payments on his behalf to trustees or managers of contracted-out money purchase occupational pension schemes in accordance with the provision of section 42A of the Pension Schemes Act 1993; and if this will vary if an earner has been employed in more than one contracted-out money purchase pension scheme, simultaneously or consecutively, in a single year. [23123]

Mr. Heald

The administration of the Contributions Agency is a matter for Mrs. Faith Boardman, the chief executive. She will write to the hon. Member.

Letter from George Bertram to Mr. John Denham, dated 1 April 1996: As the Chief Executive of the Contributions Agency is away from the office on annual leave, I have responsibility for answering questions about operational matters relating to the agency and the National Insurance (NI) scheme in her absence. I have been asked to reply to your question regarding the Contributions Agency's accuracy levels and timescales for making payments to trustees or managers of Contracted-Out Money Purchase schemes and if this varies if any earner has been a member of more than one. Following the end of each tax year the Agency receives, checks and processes approximately 40 million end-of-year returns (forms P14), containing National Insurance contributions and related earnings information. Because of the number involved the processing of forms P14 is spread over a period of months. The bulk of the processing is completed during the months from April to October, by which time approximately 90% of forms P14 are recorded on National Insurance accounts. The Agency will be required to make the payments in question to 100% accuracy within one month of acceptable National Insurance contributions and related earnings information being recorded on earners National Insurance accounts. Where an earner has been a member of more than one Contracted-Out Money Purchase scheme separate such payments will be made to the respective schemes as and when the related earnings information is recorded. I hope you will find this reply helpful.